2011 (7) TMI 751 - AT - Customs

Incorrect classification of goods in bill of entry - polyester yarn - Advance licence - once the declaration made in the Bill of Entry was found to be incorrect then the contravention of Customs provisions is established and goods are liable for confiscation under Sec.111(m) of the Customs Act - On the basis of the test report of the Textile Committee, it was found that the tenacity is 42.4 which is much below of high tenacity yarn and will fall under the category of medium tenacity yarn - High Court in the case of Commissioner of Customs (Export), Chennai vs Bansal Industries ( 2006 -TMI - 1265 - HIGH COURT, MADRAS) has held that element of mens rea is not required for imposition of punishment under Customs Act - Appeal is rejected

Summary

Issues:
Classification of imported goods as high tenacity polyester yarn, misdeclaration, applicability of Sec.111(d) & (m) of the Customs Act, imposition of fine and penalty, interpretation of mens rea in Customs Act.

Analysis:
1. Classification of Goods: The appeal concerns the classification of polyester yarn imported by the appellants. Initially declared as high tenacity yarn under heading 54022000, subsequent testing revealed it to be medium tenacity yarn under heading 54024700, which required an import license at the time. The discrepancy in classification led to the confiscation of goods and imposition of fines and penalties by the authorities.

2. Misdeclaration and Applicability of Customs Act: The appellants argued that the misdeclaration was unintentional, relying on documents received from the foreign supplier. They contended that there was no mala fide intention to declare the goods incorrectly. The appellants cited tribunal decisions to support their claim that penalties should not apply in cases of unintentional misdeclaration.

3. Fine and Penalty Imposition: The Commissioner (Appeals) had reduced the fines and penalties imposed on the appellants, considering their arguments and the circumstances of the case. The Revenue, however, supported the original findings, emphasizing the incorrect declaration in the Bill of Entry and the absence of correspondence with the foreign supplier to prove innocence.

4. Interpretation of Mens Rea: The Tribunal analyzed various decisions and the judgment of the Madras High Court regarding the requirement of mens rea for punishment under the Customs Act. The High Court's ruling emphasized that even in cases of supplier errors, importers could be held liable for penalties, indicating that mens rea was not a prerequisite for imposing penalties under the Act.

5. Final Decision: After considering the arguments and case laws presented by both sides, the Tribunal upheld the Commissioner (Appeals)'s decision to impose fines and penalties on the appellants. The Tribunal aligned with the interpretation of the Madras High Court regarding mens rea, concluding that penalties could be imposed even in cases of unintentional misdeclaration.

In conclusion, the appeal was rejected, affirming the fines and penalties imposed on the appellants for the misdeclaration of imported polyester yarn, highlighting the importance of accurate classification and the imposition of penalties under the Customs Act, even in cases of unintentional errors.